The US dollar LIBOR panel has now ceased

On July 3, 2023, the Financial Conduct Authority (FCA) published a press release to confirm the final cessation of the remaining US dollar LIBOR tenors. „This marks another critical milestone“, so the FCA, in the final transition away from LIBOR.
In the press release, the FCA confirms that the overnight and 12-month US dollar LIBOR settings have permanently ceased. The 1-, 3-, and 6-month US dollar LIBOR settings have been designated as Article 23A benchmarks, and the FCA is requiring ICE Benchmark Administration, the administrator of LIBOR, to publish them in synthetic form. Going forward, these rates will be calculated using a synthetic methodology based on the relevant „CME Term SOFR Reference Rate plus the respective ISDA fixed spread adjustment“. However, it should be noted that these synthetic LIBOR rates are no longer representative of the underlying markets which is why it is prohibited to use them in any new contracts.
Firms with legacy contracts still referencing US dollar LIBOR tenors should take all steps necessary to transition to robust and appropriate reference rates. Such transition may require the renegotiation of contracts with counterparties. In this context, the FCA specifically cautions against transitioning to „credit sensitive“ rates, as these have the potential to „reintroduce the financial stability risks associated with LIBOR“.